'S-HERTOGENBOSCH, The Netherlands, March 17, 2005 (PRIMEZONE) -- Integration of CenE Bankiers ahead of schedule, costs well under control and slight increase in income
* Earnings per ordinary share excluding effects of the acquisition of CenE Bankiers up from Euro 3.66 to Euro 4.11 (+ 12.3%); net profit up from Euro 106.7 million to Euro 119.4 million (+ 12.0%)
* Earnings per ordinary share including effects of the acquisition of CenE Bankiers down from Euro 3.66 to Euro 3.46; net profit down from Euro 106.7 million to Euro 102.6 million
* Income (excluding CenE Bankiers) 3.4% higher and 3% increase in client base
* Operating expenses (excluding CenE Bankiers) up 3.7%, efficiency ratio remains strong at 57.6%
* Operating profit of Van Lanschot Belgium significantly higher thanks to strong growth of client base
* Integration of CenE Bankiers proceeding well: completion six months ahead of schedule
* Dividend raised from Euro 1.83 for 2003 to Euroo 2.11 for 2004
* Outlook for 2005: further increase in net profit and earnings per ordinary share
Van Lanschot in 2004 Excluding the effects of the acquisition of CenE Bankiers, the Bank's net profit rose 12.0% in 2004 from Euro 106.7 million to Euro 119.4 million. Earnings per ordinary share increased 12.3% from Euro 3.66 to Euro 4.11. Funds entrusted rose from Euro 13.7 billion to Euro 14.8 billion (+ 8.1%). The portion managed for clients fell 3.1% from Euro 5.2 billion to Euro 5.0 billion.
Van Lanschot continues to successfully distinguish itself from the larger banks. The number of accounts grew 3% in the year under review. Independent research has shown that our clients are on average highly satisfied with our services. Needless to say, the Bank is doing all it can to keep it that way, in part by further improving its services where possible. For example: in the field of funds transfers, the Excellentrekening was introduced; it is now possible to finance not just second homes but also principal residences abroad; savings options have been increased and the range of investment funds has been further broadened. Furthermore, the Bank is developing a new online payment system for its corporate clients, is offering entrepreneurs an opportunity to meet at 'Financial cafes' organised on a regional basis and helped in 2004 to bring about the first 'National Family Businesses Congress'.
Acquisition and integration of CenE Bankiers
CenE Bankiers was acquired for some Euro 250 million. The acquisition and balance sheet of CenE Bankiers were funded in part by issuing 3.4 million new shares of Euro 41.00 each raising Euro 139.4 million, issuing a perpetual loan of Euro 165 million (including Euro 45 million to finance the cancellation of preference shares A as of 1 January 2005), and issues under our EMTN programme.
In accordance with the regulations of the Council for Annual Reporting, the purchase accounting method was applied for the acquisition of CenE Bankiers, meaning that the fair value of the acquired assets and liabilities is determined as at the date of acquisition, i.e. 30 September 2004. Any differences with their net book value will be amortised over the fixed-interest term. Fair value was some Euro 36 million higher than net book value. Any necessary adjustments to fair value identified within a year of the date of acquisition can result in a change in this amount. The amortisation of this amount leads to a reduction in profit for 2004 of Euro 5.4 million charged to the item Interest. This is purely a non-cash item, which in no way affects the underlying performance of the banking activities. The maximum non-cash reduction for 2005 will be Euro 16 million, with the remainder being accounted for in later years. The goodwill of some Euro 48 million involved in the acquisition, i.e. the difference between acquisition price and fair value at the acquisition date, has been charged to shareholders' funds. Goodwill can still be adjusted within a year of the acquisition date.
Apart from these non-cash items, a provision of Euro 23 million was formed for the acquisition and integration costs, Euro 15.5 million of which was spent in 2004.
The integration of CenE Bankiers is proceeding smoothly. CenE Bankiers' clients have responded positively to the takeover. To our great satisfaction, turnover of CenE Bankiers staff is low. The budgeted cost savings that can be realised through the merger of both organisations seem to be very realistic. The Bank expects to complete the integration of CenE Bankiers by the end of 2005.
Van Lanschot Belgium
Van Lanschot Belgium managed to boost its net profit significantly in the year under review. The client base grew substantially (+13%), mainly in the segment of high net-worth Belgian clients. This illustrates the appeal of Van Lanschot's private banking formula in Belgium. Loans to private individuals rose from Euro 188.6 million to Euro 262.8 million (+ 39.3%), while funds entrusted were up 21%, from Euro 1.3 billion to Euro 1.6 billion.
International Private Banking Net income from Van Lanschot's activities in the field of international private banking remained virtually unchanged. Van Lanschot Luxembourg reported a slight decline. Van Lanschot Switzerland and Van Lanschot Curacao achieved higher net profit.
Van Lanschot Assurantien
Van Lanschot Assurantien, the bank's insurance broker, realised a rise in its operating result from Euro 2.0 million to Euro 2.9 million thanks to the considerable increase in the number of clients while expenses barely budged. The private non-life insurance sector in particular performed very well, partly owing to the success of Van Lanschot Summum and Van Lanschot Ars Mundi.
Results Excluding the effects of the acquisition of CenE Bankiers, income grew 3.4% in 2004 from Euro 378.3 million to Euro 391.1 million. Interest income at Euro 218.3 million was 1.1% lower than in 2003 (Euro 220.8 million) due to a structured finance transaction entered into by the Bank in the first half of 2004. On balance, this transaction benefited net profit despite depressing 2004 interest income by Euro 6.5 million. Excluding this transaction, interest income would have been up 1.8% and total income 5.1%, particularly as a result of the growth in the home mortgage portfolio. The interest margin was further impacted by fierce competition between credit institutions: adjusted for the effect of the structured finance transaction, it fell from 1.43% in 2003 to 1.32% in 2004.
Commission income at Euro 135.0 million was little changed from 2003 (Euro 135.2 million). At Euro 93.4 million its main component, securities commission, was virtually the same as a year ago (Euro 93.6 million) because private investment in equities continued to be very hesitant. Increases were recorded in insurance commission (from Euro 19.0 million to Euro 19.7 million) and commission on documentary transactions (from Euro 2.2 million to Euro 2.4 million); commission on cash transactions and funds transfers was scarcely changed (Euro 13.1 million) and other commission declined (from Euro 7.3 million to Euro 6.4 million).
Income from securities and participating interests rose strongly compared to 2003, from Euro 6.1 million to Euro 17.2 million, mainly due to income from minority holdings of Euro 6.7 million (2003: Euro (0.1) million), equal to the level achieved in 2002. This underlines the volatility of this item. Additionally, results from participating interests swung from a loss of Euro 2.3 million in 2003 to income of Euro 1.6 million in 2004. The share investment portfolio generated income of Euro 8.7 million, slightly up on last year (Euro 8.4 million).
Profit on financial transactions likewise increased, from Euro 16.2 million to Euro 20.6 million. Capital gains on securities in particular were up substantially (Euro 12.4 million, as against Euro 3.8 million a year ago), while foreign exchange gains also increased, from Euro 4.6 million to Euro 5.2 million. Other profit however, at Euro 3.1 million, was sharply down on last year (Euro 7.8 million).
Operating expenses (total expenses net of value adjustments to receivables) increased 3.7% in 2004 from Euro 217.3 million to Euro 225.3 million. Staff costs of Euro 137.9 million were slightly lower than a year ago (Euro 138.2 million), as higher pension costs and social security contributions were offset by a decrease in the number of employees. The average number of employees, in full-time equivalents and excluding the employees of CenE Bankiers, fell from 1,770 to 1,718. Other administrative expenses climbed from Euro 62.7 million to Euro 71.8 million, owing in part to higher IT costs, increased marketing expenditure and provisions for tax claims. Depreciation edged down from Euro 16.3 million in 2003 to Euro 15.6 million. As in 2003, value adjustments to receivables of Euro 15.1 million were charged to profit. Tax on operating profit declined by Euro 4.2 million to Euro 35.1 million, partly as a result of the structured finance transaction, which reduced tax by Euro 9.6 million. For this and other reasons, the tax burden consequently declined from 26.9% to 22.7%.
Results including CenE Bankiers
Including CenE Bankiers income increased in 2004 from Euro 378.3 million to Euro 404.5 million. Operating expenses increased from Euro 217.3 million to Euro 257.7 million, and total expenses from Euro 232.4 million to Euro 269.7 million. Net profit amounted to Euro 102.6 million. CenE Bankiers contribution to net profit in the fourth quarter was Euro 5.6 million, the non-recurring net charge incurred for acquisition and integration costs was Euro 16.2 million (gross charge Euro 23.0 million), the additional costs to finance the acquisition were Euro 0.8 million and the amortisation under the purchase accounting method amounted to Euro 5.4 million. Taking into account these effects and the increase in the number of shares as a result of the share issue in November, earnings per ordinary share were Euro 3.46.
Balance sheet
Excluding the effect of the acquisition of CenE Bankiers total assets increased in 2004 by 12.1% from Euro 11.6 billion to Euro 13.0 billion. Loans and advances rose 7.1% or Euro 638 million from Euro 9.0 billion to Euro 9.7 billion, thanks to the home mortgage portfolio in particular, which grew Euro 610 million, or 11.9%, from Euro 5.1 billion to Euro 5.7 billion. The item Banks rose in the year under review by Euro 509 million, from Euro 1.1 billion to Euro 1.6 billion.
Funds entrusted grew by Euro 89 million, or 1.1%, from Euro 7.9 billion to Euro 8.0 billion. Savings accounts increased Euro 258 million from Euro 2.0 billion to Euro 2.2 billion, despite ongoing fierce competition on the savings market. The Bank introduced internet saving in the latter part of the year. Other funds entrusted were down Euro 169 million, falling from Euro 5.9 billion to Euro 5.8 billion. The increase in total assets was largely financed by debt securities issued under the Euro Medium Term Note programme arranged by the Bank in 2003. As a result, debt securities increased Euro 1.2 billion to Euro 2.5 billion.
Balance sheet including CenE Bankiers
Including CenE Bankiers total assets climbed from Euro 11.6 billion to Euro 16.2 billion. Loans and advances went up from Euro 9.0 billion to Euro 12.6 billion. Funds entrusted rose from Euro 7.9 billion to Euro 11.0 billion. Shareholders' funds increased from Euro 693 million to Euro 819 million, and group capital base from Euro 1.1 billion to Euro 1.4 billion.
Financial ratios
Excluding the effects of the acquisition of CenE Bankiers the efficiency ratio (operating expenses as a percentage of total income) in 2004 remained strong at 57.6% (2003: 57.4%). The return on shareholders' funds was 16.4% as against 16.1% in 2003.
Financial ratios including CenE Bankiers
Including the effects of the acquisition of CenE Bankiers, the efficiency ratio in 2004 rose to 63.7%; the return on shareholders' funds was 13.6%. Risk-weighted assets increased from Euro 7.8 billion to Euro 10.7 billion. The BIS Tier 1 ratio increased from 8.7% to 9.2%, which is very comfortably above the minimum requirement of 4%. The BIS total capital ratio, for which the minimum requirement is 8%, declined from 12.6% to 11.8%. Van Lanschot's own minimum requirement is 10%.
IFRS Van Lanschot applies International Financial Reporting Standards (IFRS) for its external reporting with effect from 1 January 2005. The first full report applying IFRS will be the 2005 half-year report. To prepare for the adoption of IFRS, Van Lanschot analysed the differences between IFRS and generally accepted accounting principles in the Netherlands up to and including 2004. This analysis provided a basis for the necessary changes in systems and procedures. Provisional calculations show that the main conclusion regarding shareholders' funds is that it would have been some Euro 225 million higher in 2004 under IFRS at some Euro 1,045 million instead of Euro 819 million. Factors contributing to this net increase are the reclassification of the perpetual loan of Euro 165 million (positive effect), the release of the Fund for General Banking Risks (positive effect), goodwill for CenE Bankiers (positive effect), the pension commitments (negative effect) and the reclassification of the preference shares of Euro 45 million (negative effect).
The main conclusion as far as profit for 2004 is concerned is that the effect of IFRS seems to be limited. Additional figures will be provided in the 2004 annual report.
Van Lanschot share
The issue of 3.4 million new shares to finance the acquisition of CenE Bankiers has led to an increase in the number of tradable shares, in line with the Bank's aim of increasing the liquidity of its shares and its shareholder base. The share issue attracted great interest from institutional investors and was accordingly many times oversubscribed. A total of 2.03 million Van Lanschot depositary receipts were traded in 2004, as against 1.04 million in 2003.
Dividend
After a deduction of Euro 3.4 million in dividend on preference shares, the profit attributable to holders of ordinary shares (excluding the effects of the acquisition of CenE Bankiers) for 2004 amounts to Euro 116.0 million. However the Bank also wants its shareholders to benefit from the contribution to profit CenE Bankiers made in the fourth quarter. This translates into earnings per ordinary share of Euro 4.22, based on the average number of ordinary shares in issue. As in previous years the Bank has decided to pay out 50% to shareholders as dividend. Subject to approval of the relevant resolution by the General Meeting of Shareholders, the dividend for 2004 will therefore amount to Euro 2.11. After deduction of the interim dividend of Euro 0.76 distributed in November 2004, the final dividend therefore amounts to Euro 1.35. The dividend will be distributed in cash.
Composition of the Supervisory Board
To fill the vacancies on the Supervisory Board the following persons will be nominated for appointment by the Supervisory Board as Supervisory Director of Van Lanschot NV and F. Van Lanschot Bankiers by the Annual General Meeting of Shareholders: - Mr J.B.M. Streppel, member of the Management Board of Aegon NV, to fill the vacancy that arose after Mr A.A. Anbeek van der Meijden stepped down on 12 May 2004; - Ms T.M. Lodder, commercial director of The Netherlands Opera and director of the Foundation Het Muziektheater, Amsterdam, to fill the vacancy that will arise after Mr H. Langman steps down at the Annual General Meeting of Shareholders to be held on 11 May 2005. Ms Lodder is nominated on the recommendation of the employees council (in accordance with Article 24, paragraph 3 of Van Lanschot NV's Articles of Association); - Mr H.J. Baeten to fill the vacancy that will arise after Mr W.E. de Vin steps down at the Annual General Meeting of Shareholders to be held on 11 May 2005. Mr Baeten is nominated on the recommendation of La Dou du Midi B.V.
Outlook for 2005
Europe is still lagging behind the economic recovery that emerged in the world last year. This is certainly the case in the Netherlands, with continuing pressure on consumers' purchasing power. Consumer confidence is therefore likely to remain low and this will impact spending. In 2004 the housing market was supported by a continuing substantial decline in mortgage interest rates, but in view of the already very low interest rates we do not consider it likely that 2005 will provide a similar impetus again. We accordingly expect fierce competition in the mortgage market in 2005, further squeezing interest margins. The market for switching mortgages is likely to continue to be strong, at least as long as capital market interest rates are not markedly higher. On balance, we expect to achieve modest growth in mortgage lending. Investors made a cautious return to the stock markets last year, but are still hesitant. The Bank will continue to set itself apart with further expansion of its services focused on customised solutions. For that purpose, we will develop new investment propositions, which will in part be directed at investment products with a low risk profile and in part also encompass more innovative investment opportunities. These new products can serve to further underline the Bank's distinctive position in terms of investments and contribute to growth in commission income.
While manufacturers' confidence is also still at a relatively low ebb, entrepreneurs appear to be cautiously prepared to increase investment somewhat. The Bank will actively respond to this by further expanding its services to family businesses in particular, drawing in part on CenE Bankiers' broad expertise in the field of business banking. We are accordingly expecting growth in corporate lending, but again, the positive effect on interest income will be partly offset by further erosion of the interest margin.
Final comment Organic growth of income through an increase in the number of clients and number of services provided to each client (cross selling) will be a top priority in 2005. The integration of CenE Bankiers is proceeding well, reducing costs. Van Lanschot expects some 60% of the total attainable savings of Euro 11 million to be realised in 2005.
Barring unforeseen circumstances, Van Lanschot is confident that net profit and earnings per share will increase further in 2005
Annexes:
Consolidated balance sheet Consolidated profit and loss account Key figures for second half 2004 Ten-year summary Notes on purchase accounting Key dates:
2005 Annual General Meeting of Shareholders 11 May Ex dividend date 13 May 2004 dividend payable 20 May Publication of 2005 half-year figures 31 August (previously announced for 18 August)
2006 Publication of 2005 figures 16 March Annual General Meeting of Shareholders 10 May
F. van Lanschot Bankiers NV is the oldest independent Dutch bank, with a history dating back to 1737. The Bank focuses on three target groups: high net-worth individuals, medium-sized businesses (including family businesses) and institutional investors. Van Lanschot stands for high-quality services founded on integrated advice, personal service and customised solutions. Van Lanschot NV is listed on the Euronext Amsterdam Stock Market.
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